Legislation Would Allow British MoD To Outsource DE&S Management

May. 8, 2013 - 07:30AM
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LONDON -- The British government will introduce legislation in the next session of Parliament to pave the way for outsourcing management of its defense procurement and support operations.

The Queen’s Speech, which sets out the Conservative-led coalition government's legislative priorities for the session of Parliament starting today, included a bill to enable the Ministry of Defence to fundamentally restructure the way it manages its £14 billion (US $21.4 billion) a year Defence Equipment & Support organization.

The legislation change follows Defence Secretary Philip Hammond's April 25 announcement that the government was starting a final 12-month assessment of a government-owned, contractor-operated scheme to outsource procurement and support functions to a private contractor.

Defense News reported April 29 that the Go-Co plan had raised concerns in the US government. A joint bilateral Pentagon/MoD team has been set-up to explore some of the issues being voiced in Washington.

The British government is assessing the Go-Co and a heavily restructured version of the current DE&S operation. At the same time it is running the assessment phase, the government is starting an industry competition to run the Go-Co.

The plan is to have a contractor in place by around the middle of next year, with the first phase of the takeover starting in the winter of 2014. It’s likely the Go-Co will be a phased effort starting with procurement and support in the air sector.

The change, if it is approved, requires new legislation to allow the Go-Co arrangement to go ahead smoothly.

A MoD spokeswoman said that given the size of the proposed changes, the introduction of the bill will allow the issue to be reviewed and debated by Parliament.

The new bill will also strengthen the arrangement for single source procurement in the wake of an earlier independent review into the costs and profits defense companies can make from noncompetitive contracts .

Currently, the rules for noncompetitive contracts are governed by what is known here as the Yellow Book – regulations that have been in place since 1968. No details are available yet on the proposed changes resulting from the 2011 review by Lord Currie.

One of Currie’s recommendations at the time was to remove the cap on profit margin and allow contractors real incentives to cut costs and share savings with the MoD. Government ministers at the time of the review said the changes would ensure single source procurement delivered greater value for money than the current scheme.

Around 40 percent of British defense contracts are single-sourced, including platforms such as Astute nuclear submarines and Typhoon fighter jets.

A second bill going before the House of Commons will cover plans to significantly increase the size and role of reserve forces here.